House Prices

madisona

Is the rise in property prices set to continue. Will there be a gradual slowdown or is there are chance that the bubble will burst?

Victor

Let me check my crystal ball......

.... no, its says nobody knows for sure.

MorningStar

madisona wrote:

Is the rise in property prices set to continue. Will there be a gradual slowdown or is there are chance that the bubble will burst?

Start with out any assumptions and look at the facts. For starts stop assuming there is a bubble.

leahcim

The Irish Examiner have a story today saying that the AIB expect house prices to increase by 7% a year for the next few years.

http://www.examiner.ie/pport/web/business/Full_Story/did-sgH49gXZIMzjUsgDQQ5wn3uAIg.asp

But of course they are a vested interest being a mortgage vendor.

Culchie

leahcim wrote:

The Irish Examiner have a story today saying that the AIB expect house prices to increase by 7% a year for the next few years.

http://www.examiner.ie/pport/web/business/Full_Story/did-sgH49gXZIMzjUsgDQQ5wn3uAIg.asp

But of course they are a vested interest being a mortgage vendor.

Of course they do, but that doesn't alter the fact there is still a strong demand in the market, and the 100% mortgage and SSIA's coming on stream is only going to add further fuel to the market again.

copacetic

nobody knows, the same groups that predict a collapse are the same taht have been predicting it for 5 years and prices have kept going up.
i think the most likely result is a gradual slowdown which is what seems to be happening, but like the AIB report says 7% is a 'gradual slowdown'. 7% is still a chunk of change on current house prices!

the development I am in has gone up ~ 15% since march.

MorningStar

daveym wrote:

nobody knows, the same groups that predict a collapse are the same taht have been predicting it for 5 years and prices have kept going up.
i think the most likely result is a gradual slowdown which is what seems to be happening, but like the AIB report says 7% is a 'gradual slowdown'. 7% is still a chunk of change on current house prices!

the development I am in has gone up ~ 15% since march.

Well generally if you pay attention to the property market and not just the head line in the papers you can make a pretty educated guess.
The impact of the SSIAs is going to be the real driver as demand never really slowed and production is tailing off if you look at what planning has gone through.

I don't know what development you live in but if it is part of phased devlopment jumps are not uncommon. In saying that as far I can figure house prices around me have gone up 35-40% in a year and half.

copacetic

MorningStar wrote:

Well generally if you pay attention to the property market and not just the head line in the papers you can make a pretty educated guess.
The impact of the SSIAs is going to be the real driver as demand never really slowed and production is tailing off if you look at what planning has gone through.

I don't know what development you live in but if it is part of phased devlopment jumps are not uncommon. In saying that as far I can figure house prices around me have gone up 35-40% in a year and half.

of course anyone can guess, educated or not, i said nobody knows

threebeards

As Victor said it's a crystal ball thing. Economists differ hugely on their opinions. The guy from IIB (Hughes I think) is always very optimistic and claims that there will be moderate growth going forward and then you have doomsayers like Jim Power from Friends First - it's said that he's correctly predicted 13 out of the last 2 recessions

Victor

daveym wrote:

the development I am in has gone up ~ 15% since march.

Be wary of things like that, based on individual developments.

* Completion of a development, will increase prices - no more construction traffic / noise. Residents settling in.
* Phased development - builders will test the waters with lower prices at the start, if they aren't selling they will slow down / stop building. Later phases will pay higher prices.

Remember that second hard buyers stamp duty will cut that 15% increase in half.

copacetic

Victor wrote:

Be wary of things like that, based on individual developments.

* Completion of a development, will increase prices - no more construction traffic / noise. Residents settling in.
* Phased development - builders will test the waters with lower prices at the start, if they aren't selling they will slow down / stop building. Later phases will pay higher prices.

Remember that second hard buyers stamp duty will cut that 15% increase in half.

agreed, but my 15% estimate is a combo of the new phases and the increase in price people are getting on second hand ones too, tbh it looks like they will be developing here for another 2-3 years at least. still the cheapest apts in phase in march were 320 and in the latest phase are 360 and imo aren't as nice.

Of course by the time it is all finished there are bound to be 5-10 apts for sale second hand at all times so if you are in a rush to sell could be in trouble..

Victor

daveym wrote:

it looks like they will be developing here for another 2-3 years at least.

Then realise that for that period of time, you are unlikely to be able to sell at even the new apartment price because of stamp duty. Yes, your property will be more tried and tested, more settled, but also a little more worn.

copacetic

Victor wrote:

Then realise that for that period of time, you are unlikely to be able to sell at even the new apartment price because of stamp duty. Yes, your property will be more tried and tested, more settled, but also a little more worn.

well they are developing in phases off a main entrance road, i.e you can get into my phase without having to go through any of the others, the only issue is mucky main road in.... The phases are quite seperate and there have seem to have been a reasonable amount of sales going on and judging by rumour and myhome etc they have been doing alright. some of the house and apts in the first phase are 2 years old I think, they seem to be doing well anyway.

Am in no rush to sell though, I am hoping when things are a bit more finished and all the shops and new roads are in it will be a big selling point..

it's aiken's village in sandyford out of interest.

ixus

The 2 sides as i see it:

1. Developers have full control of their land,with the banking of the banks, they decide when to release developments and when to hold back. Thus controlling the market. As has been said above, banks are vested interests, so are the likes of Goodbody Stockbrokers. They all want property prices to continue rising..

2.We have a bit of a vicious circle appearing in terms of the construction industry. The more houses built, the more workers required, hence the eastern european influx. What happens when development slows down? Do the cheaper Eastern Euroeans get sent home or do Irish people lose their jobs? Either way, it's a problem, whether it's unemployment or house vacancies from foreigners sent home.

Then there's inflation and interest rates. What happens if & when it rises?

For me, the biggest thing is when Intel departs this isle, which hasn't been helped by the recent EU ruling which encouraged Intel to set-up inn Israel.

For me it's a case of 1 for the next year or two with 2 coming soon.

Could be toally wrong though!

Lex Luthor

ixus wrote:

For me, the biggest thing is when Intel departs this isle, which hasn't been helped by the recent EU ruling which encouraged Intel to set-up inn Israel.

For me it's a case of 1 for the next year or two with 2 coming soon.

Could be toally wrong though!

Intel not departing here any time soon...I'm in the thick of the construction phases there and we are gonna be flat out for the next few years...then when we're finished you are talking about at least another 4-5 yrs of manufacturing....the move to Israel was only a set back....the 2nd extension to the latest fab will happen in 2007...too much money invested by them to turn & run in next 2 yrs

copacetic

Lex Luthor wrote:

Intel not departing here any time soon...I'm in the thick of the construction phases there and we are gonna be flat out for the next few years...then when we're finished you are talking about at least another 4-5 yrs of manufacturing....the move to Israel was only a set back....the 2nd extension to the latest fab will happen in 2007...too much money invested by them to turn & run in next 2 yrs

also intel have been in israel for a long time already, there was no new move into israel recently as ixus implied. they just decided to build a new fab, which is what could have happened anyway, just like what happened after the last fab was finished in Ireland.....

Lex Luthor

daveym wrote:

also intel have been in israel for a long time already, there was no new move into israel recently as ixus implied. they just decided to build a new fab, which is what could have happened anyway, just like what happened after the last fab was finished in Ireland.....

To be honest they've wanted to put a new fab in Israel for years....I think F24 was in doubt at the planning stage here cos Israel nearly got it.

Intel Ireland is the benchmark for Intel worldwide.

Thats off the topic......

I also think that estate agents are very much responsible for the rises in house prices also...a 3 bed semi was sold 2 dorrs down from me 9 months ago for €320k. There are now 2 others in the street behin with asking prices of €350k & €355k. Ok asking prices are asking prices, but the estate agents are recommending them..
Plus, there is very little in the way of new developments in our town to guide these prices on, so they seem to be just asking for well over the odds.

The bubble will continue to grow for the forseeable future.

lomb

ixus wrote:

The 2 sides as i see it:

1. Developers have full control of their land,with the banking of the banks, they decide when to release developments and when to hold back. Thus controlling the market. As has been said above, banks are vested interests, so are the likes of Goodbody Stockbrokers. They all want property prices to continue rising..

untrue, the planners have control, over density, zoning etc. if i owned 500 acres of land in certain parts of co dublin, it would be useless for anything except farming ,until it is rezoned.
development plans are written every 5 or 10 years. developers take positions on lands outside development zones hoping they will be rezoned (sometimes bribing and loobying etc but thats another story kids)
when they are rezoned u can build build build. until then u can farm farm farm:D
ps hope land is worth 500 grand per acre, agri land is worth 12 -20 grand an acre, development land is probably worth anything from 1 million an acre to the sky is the limit based on density and location.

there is a lead time in all business, even if i bought land in a development zone, it would take 2 years to get to market, after id have wasted 6- 8 months with the planners, 2 month with architects,1-2 months on tenders, 1-2 year for phased construction etc etc etc.

folks theres more to building than u realise..

Trampas

Rumours are interest rates could rise in the next 3 - 6 months maybe only a 1/4% but what would ever happen to a rise of 1% in the next year.

Will people be able to afford their house??

I am not to sure.

What do estate agents do but look after themselves??

Newshound

Just imagine over the next 18 months. Lots of couples will get around €40000 between them in a lump sum. Also they'll have about €500 extra each month in their pockets they won't be putting into their SSIAs.
I see house prices going only one way - up for the next few years.
But thats only my personal crystal ball. Which is as unreliable as everyone elses

dochasach

Culchie wrote:

Of course they do, but that doesn't alter the fact there is still a strong demand in the market, and the 100% mortgage and SSIA's coming on stream is only going to add further fuel to the market again.

Since the Irish Newspapers and lenders have been so unbiased (cough) regarding the property bubble, I'll use their stats. In the recent Examiner article:

"...the record 77,000 houses being built this year will be equalled in 2006 and 2007"

The article concludes with:"It is a statistical fact however, that our population is continuing to grow. By 2025 another million people will live here.
For that reason talk of a price bubble still looks like an unwarranted fear."

Now, let's do the numbers. Assuming the economy stays strong, the birthrate remains high and immigrants aren't kicked out, there may be a net 1 million increase in Ireland's population by 2025. And if the current rate of construction, 77000 homes/year continues for the next 20 years there would be 1.54 Million new homes. Every man, woman and child would have 1.5 homes to themselves.

So clearly sometime during the next twenty years the explosive construction rate has to slow. But here's the rub, construction has become such a huge part of the Irish economy that slack in this industry would hurt the entire economy. Unemployment would rise and lead to less immigration and more emmigration. Whenever a nation faces high unemployment, people blame immigrants and pressure the government to keep them out. What happens if immigrants go home? A recent Irish Times insert claimed that a high percentage (30?%) of the new buyers are non-nationals. If they stop buying or are forced to sell and leave, the downward propety spiral would continue.

A second frightningly wrong but almost universally accepted assumption is that variable interest rates will stay low or rise only slightly. The only way this would happen is if the economy in France, Germany, other large E.U. states and the United States continues to languish while Ireland magically thrives. That's what I call betting on luck.

Then there is the old 150 rule of thumb. Check boards.ie or the newspapers to see how much a given property rents for. Multiply the monthly rent by 150 and you'll have (approximately) what the property should sell for. This is sort of a price/earnings ratio for property and nearly everything in Dublin is selling for almost double what it should be worth.

Oh, you figure, I'll just rent out my 2 bedroom investment property for 2000/month. Right, and where exactly is the money coming from? Another ratio which eventually obeys the laws of economics is the ratio of wages to rents. Either all of us are due for a 50% pay rise, or property has to fall. Which do you think is more likely? This invariable ration is the reason why rents are falling. From 2000-2004 my rent rose every month to nearly 1200/month. We found a better place at a lower price and later learned that our previous apartment sat empty for several months before finally renting at less than 900/month.

What about overseas property? In parts of the E.U., the average age is rising and population is falling and so more property will become available in coming decades.

Sorry to frighten anyone on halloween, but I'd sooner bet on a lame horse than bet that Irish property prices can continue to defy the laws of economics forever.

AndyWarhol

dochasach wrote:

Since the Irish Newspapers and lenders have been so unbiased (cough) regarding the property bubble...

...We found a better place at a lower price and later learned that our previous apartment sat empty for several months before finally renting at less than 900/month...

Well seeing as you rent, isn't your hopeful analysis biased? Every man and his dog it seems is a property expert these days.

lomb

ur forgetting inflation is a fact of economics and inflation is compound hence in 100 years the average dublin house will be probably be worth about 2 million euros-3 million euros. BUY BUY BUY:D

TheBigLebowski

Dochasach, people gave very similar arguments 5 years ago and if you had bought a house then, instead of renting, you'd be doing very well.
Obviously the current rate of increase can't last forever. That's obvious, but there is a difference between a slow down in the rate of increase and the doomsday scenario you predict. If property prices were to fall it is unlikely that they will fall by much. It is considered a property price crash is if prices drop 10-15%. I would stake my life that a house that sells now for 300k will never sell for less than 250k.
At the current rate of increase, if you bought a house now. Your property will increase by that 10-15% within 2 years anyway, and I don't see a crash coming within 2 years. Also I'm pretty sure you wouldn't be waiting too long for prices to pick up again as peoples wages are only going to go up.

MorningStar

dochasach wrote:

Now, let's do the numbers. Assuming the economy stays strong, the birthrate remains high and immigrants aren't kicked out, there may be a net 1 million increase in Ireland's population by 2025. And if the current rate of construction, 77000 homes/year continues for the next 20 years there would be 1.54 Million new homes. Every man, woman and child would have 1.5 homes to themselves.

So clearly sometime during the next twenty years the explosive construction rate has to slow.

Why do you think they will keep producing houses ant such a huge rate constantly? It's not going to happen. People will stop building if there is no money in it. Expecting it to go on like that for ever is really un realistic.

In fact you arguments seems to take massive leaps and jumps that to an extent counter each other.

THe only real people who get effected by a massive price crash are those who bought very close to the time of the crash. THe next two years are unlikely to have this problem due to the SSIAs after that a drop is possible. It might not be a crash and there are still an awful lot of people wanting to own a property at the moment in fact tha majority of irish adults under 25 want to own a house at some point. You need to kill all them to stop the house demand.

dochasach

AndyWarhol wrote:

Well seeing as you rent, isn't your hopeful analysis biased? Every man and his dog it seems is a property expert these days.

I've owned property and was even a landlord for a while. I made a few quid on a decade of property inflation. But no thanks, I think I'll sit this one out. Propertys can no longer break even on rent alone, they all depend on a continuence of the bubble which depends on ultra-low intrest rates. I'm not an expert and neither is my dog, but this guy: http://www.fortune.com/fortune/investing/articles/0,15114,1117911-1,00.html is an expert and he is getting out. Tom Barrack (smarter, quieter and more successful version of Don Trump) is normally fearless but even the relatively tiny property bubble in the U.S. has him nervous.

Yeah I know. Ireland is different {insert suitible magic incantations and handwaving from estate agents, newspapers, building cartels, property investors, politicians and bankers ... all of whom have much to gain by prolonging the bubble}.

Remember, Alan Greenspan's "Irrational Exhuberance" remark was made in 1996. The tech bubble continued to increase for another 4 years before bursting. Bubbles always deflate but no one can predict exactly when because this depends on the mob psychology.

Sorry, I may be biased, but from where I sit the emporer is stark naked.

TheBigLebowski

You make many assumptions. The main one being that there is in fact a bubble. Personally I think that property was undervalued 10 years ago and is now more inline with what it is actually worth.

To add, I think that comparisons with the stock market are a little far fetched. The reason being that everyone needs somewhere to live. If I have shares in Microsoft and I get bored with them, I can sell them and blow the cash. I can't do that with my house because I along with everyone else needs somewhere to live. This along with the fact that investors still make up a very small percentage of the market as most owners are owner occupiers means that there is not much chance of a collapse anything like the tech stock crash.

MorningStar

dochasach wrote:

I've owned property and was even a landlord for a while. I made a few quid on a decade of property inflation. But no thanks, I think I'll sit this one out. Propertys can no longer break even on rent alone, they all depend on a continuence of the bubble which depends on ultra-low intrest rates. .

I have never heard of a small investor being able to make enough rent off the bat to pay all expenses of the property. Some devlopers yes but not small time investors. Regardless of how you feel this all works if you are paying rent and own no prperty you aren't saving any money over the long term. Your advise and rational thus far don't seem to have perals of wisdom showing through.
I very much doubt you have the expertise and knowledge given how unbalanced the things you have said. I think anybody will be pressed to find a financial expert in the world that will say it is better to rent in Ireland when you have the money to buy.
Property is really simple buy a good property in decent location so even if there is a crash you will have the most protecction and quickest recovery. If you can afford the house andand a 1% increase you will most likely be alright. Property is always a risk the idea is to reduce your risk not avoid it completly. In the game of your home you aren't really playing the property game as such but the property market may effect your home.

LegacyUser

I agree with you Morning Star, some very good points made however, Why add such a personal attack in the middle of the post though .. and others in this forum

"very much doubt you have the expertise and knowledge given how unbalanced the things you have said."

At first reading, your posts are very informative .. but then those sort of comments give the impression of a disgruntled being?

dochasach

MorningStar wrote:

I have never heard of a small investor being able to make enough rent off the bat to pay all expenses of the property.

You must be younger than me, before the bubble this was possible.

I very much doubt you have the expertise and knowledge given how unbalanced the things you have said. I think anybody will be pressed to find a financial expert in the world that will say it is better to rent in Ireland when you have the money to buy.
....

This is O.K. advice with all the disclaimers:
IF you can afford it (if you need a 100-120% adjustable mortgage, you can't)
IF it is your primary home
IF you can ride out 5-25 years of stagnant or falling property prices and
IF you have the right to live in Ireland long enough to ride out a period of negative equity.

I just reread the Irish times insert headline, 30% of current buyers are non-nationals. How many of those 30% are here on 1-2 year visas? How many have visas tied to employment in the construction industry? How many are among those the populist government continually tries to evict? And here's the really scary one, how many are foreign investors with no interest in Irish property other than that it is currently a golden goose?

I think we have a bubble. Tom Barrack, The Economist magazine, Alan Greenspan and the IMF agree. If I'm wrong I'm in good company. The global bubble is more intense in Ireland because of the low EU unified interest rate, builder cartels, the recent economic boom and government meddling to please developers, (deja-vu? *cough* *chaughy*) but it's still a bubble.

I'm not even sure why I care enough to mention it here because its clear that those who have bought into the property hype won't be convinced until they see falling prices and then they'll blame the early messengers for upsetting the fantasy.

Here are a few places where non-inflation adjusted property prices have fallen in the past: Sydney, Hong Kong, San Diego, Houston, San Francisco, London, Tokyo, Amsterdam, Berlin.

But Dublin is different...

copacetic

hardly 'early messenger' in fairness. people have been saying exactly what you are spouting above for 6 years or more now and we are still waiting for the crash. People like you will keep saying it for the next 6 years no doubt and will eventually be right, everyone knows the market moves in cycles, but a 'crash' is looking less and less likely.

As for your guesswork on non-nationals, you can't get a mortgage on anything but a full permanent working visa, so all your ??'s are pointless.